Events of the past few days trouble Manfred. The priest tells Manfred to release Theodore before he does Manfred’s bidding. At the gate is the herald from the “knight of the gigantic saber’ who wishes to speak with the “Usurper” of Otranto, The mention of Usurper by Father Jerome forces Manfred to personally meet the herald. Meanwhile Manfred holds Theodore hostage and orders Father Jerome to go to the convent to bring Isabella, The herald tells Manfred that the Marquis of Vicenza, Lord Frederic demands the lady Isabel/a, daughter of that prince (Frederic) whom Manfred has traitorously got into his power and also to resign the principality of Otranto which has been usurped by Manfred from the rightful owner; Frederic, the nearest of blood to the last rightful Alfonso the good, otherwise there will be extreme combat.
Meanwhile, Manfred reflects about his present circumstance. Indeed the ancestors of Frederic are the assumed princes of Otranto since the death of Alfonso the Good and this claim has not raised any controversy until Manfred, his father and grandfather; being too powerful disposes them of that position. Frederic’s pretty wife is said to have died during the birth of Isabella and her death affects Frederic so much that he picks up the cross and embarks on a journey to the holy land. There in the ho1y land, he is injured by some infidels during an encounter. He is imprisoned and even reported dead and Manfred, hearing this, bribed the guardians of Isabella to bring her to him to be married by his son Conrad. By this unholy union, Manfred hopes to legalize the claim of the two families to the throne of Otranto. This motive further spurs him to marry Isabella himself after the death of his son and he seeks the consent of Frederic the father of Isabella to legitimize his purpose.
Father Jerome still agitated, returns to the monastery, used of what to do. He is informed of the apparent death of lady Hippolita. Furthermore, he is told that Isabella may have her chamber as she is nowhere to be found. Hence, e returns to Manfred to convince him of his innocence in company of his train is carrying a gigantic sword. The plumes (feathers) on the big helmet are once more agitated as Manfred makes spirited effort to get the knight to talk to but to no avail. Suddenly, the gigantic sword falls beside the helmet and cannot he moved any longer. Afraid of his fate, Manfred asks several questions and gets no answer. But he tries to defend his right to the throne the knight only shakes his head. Even when Manfred tries to evoke pity by telling the knight of the death of his son and the liberty of Isabella, the knight remains unmoved. Besides, he tells the knight that his marriage to Hippolita is unlawful as he hopes to be freed from that wholly relationship soon. Again, he says that he is determined to restore the line of Alfonso the Good and the best way to do this marry Isabella.
When Father Jerome arrives with his company, the truth about Isabella’s flight is uncovered. When Manfred is confronted with the issue, he tries to prevaricate and Father Jerome also fearing for the safety of his son tries not to contradict him. At this juncture, the group goes out in search of Isabella. Theodore has already found Isabella in the cave and he tries to prevent a person in search of Isabella from entering. The knight and the peasant talk briefly and a scuffle ensues and Theodore injures the knight. Not long, the two men that he is Frederic, her Father and so Frederic is taken to the castle to be attended to.
The troop meets Matilda and Hippolita at the castle. Isabella finds out that Matilda and Theodore have affection each other. Frederic narrates his dream about Isabella to Hippolita and others during his imprisonment. He dreams of Isabella being in danger. Ransom is paid on his behalf and so he sets out for the forest which he had dreamt about. In the woods, he encounters a hermit who instructs him to dig a certain spot as a matter of secrecy. In that spot, Frederic finds a gigantic saber with inscriptions thus:
Where’ er a casque that suits this sword is a fount
With perils is thy daughter compass’d round
Alfonso’s blood alone can save the maid
And quiet a long restless prince’s shade
At the arrival of Manfred and Jerome, Manfred, seeing Theodore believes that Theodore is the host of Alfonso but Hippolita tries to diffuse the tension by saying that it is Theodore and not a ghost. Manfred asks Theodore how he escaped but. Theodore indirectly remarks that his father, Jerome freed him. Though surprised by this change he does not want to contradict Theodore and him (Theodore) is reproached by Manfred whom he gives his sword as a sign of surrender, in defense of his father. The people are deeply to ched including Manfred who fears Theodore for his striking resemblance to Alfonso. Manfred subsequently orders Theodore to tell his tale.
In the narration, it is told that Theodore and his Mother were taken from Sicily to Algiers when Theodore was baby, five and his mother died soon after. She had left a note stating that Theodore was the son of the prince of Falconara. Theodore was in slavery for a period of time until he was finally delivered by his captain of a Christian ship who brought him back to Sicily. Soon after his return, he realized that his father’s estates had been destroyed, prompting his father to retire to the monastery in Naples. In search of his father, he eventually came to Otranto. Finally, Frederic asks Manfred to pardon Theodore and everyone retired to their chambers.
Meanwhile, Matilda and Isabella are worried about Theodore. On her part, Matilda thinks that Theodore has love for Isabella and his thought provokes jealousy which makes her talk to Isabella. Ironically, Isabella thinks that Theodore loves Matilda and wishes that she might not accept his intentions but instead he should love her (Isabella). The two women talk for a moment about Theodore and Matilda informs Isabella of Theodore resemblance to the picture of Alfonso. However, Isabella overcomes her jealousy and informs Matilda of Theodore’s love for her, thus, leaving him for Matilda. To avoid any possible destruction, Hippolita informs the two girls of her decision to give Matilda to Frederic as a wife. This shocks the girls. Isabella tells Hippolita and Matilda about Manfred’s intention to divorce Hippolita, shocked by this revelation, Hippolita accepts the proposal for her divorce and chooses to retire to the monastery Manfred goes to the convent, thinking that Hippolita has gone to block the divorce. This elicits verbal exchange of resentment between Father Jerome Manfred. All of a sudden, three drops of blood fall from the nose of Alfonso’s status. Hippolita accepts the divorce end Wey return to the chamber.
Manfred is not favourably disposed to rawer Jerome’s attitude. He suspects that the Friar (Father Jerome) enjoys the secret support of Frederic. He is even more apprehensive to think of the striking resemblance between Theodore and the portrait oh Alfonso. He is burdened by the thoughts of the present circumstance and more still, his inability to extricate himself due largely to pride and ambition. Manfred takes Hippolita aside and asks to know from her what she knows between Isabella and Theodore, and when he could not get a tangible answer from Hippolita to establish the affection between Theodore and Isabella, he summons Bianca, servant of Matilda to discuss the same suspicion of a relationship. When he could not extract the needed information, he dismisses her and goes to talk to the Marquis. While they talk, Bianca runs back in terror to alert Manfred of the appearance of an apparition: In Bianca’s words:
When I heard the clattering of armour, I was all in a cold sweat, I looked up… I saw upon the uppermost banister of the great stars a hand in armour as big as big. I thought I should have swooned”.
Manfred is greatly alarmed by these strange occurrences. On his part, as Frederic leaves the company of Manfred, he goes to Hippolita to encourage her to as apt the divorce since Manfred’s resolve to take Isabella is unalterable. TO his greatest shock, he confronts a ghost at the cash be which reminds him of the task he was given at the “wood in joppa”. The ghost had asked him about the ‘buried saber with the heavenly engravement. Finally, the ghost warns him to forget about Matilda. Frederic is frightened to a freezing point and can neither speak to Hippolita nor Matilda.